Correlation Between Travel Leisure and SMA Solar
Can any of the company-specific risk be diversified away by investing in both Travel Leisure and SMA Solar at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Travel Leisure and SMA Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Travel Leisure Co and SMA Solar Technology, you can compare the effects of market volatilities on Travel Leisure and SMA Solar and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Travel Leisure with a short position of SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travel Leisure and SMA Solar.
Diversification Opportunities for Travel Leisure and SMA Solar
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Travel and SMA is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Travel Leisure Co and SMA Solar Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMA Solar Technology and Travel Leisure is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Travel Leisure Co are associated (or correlated) with SMA Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMA Solar Technology has no effect on the direction of Travel Leisure i.e., Travel Leisure and SMA Solar go up and down completely randomly.
Pair Corralation between Travel Leisure and SMA Solar
Assuming the 90 days trading horizon Travel Leisure is expected to generate 10.58 times less return on investment than SMA Solar. In addition to that, Travel Leisure is 1.16 times more volatile than SMA Solar Technology. It trades about 0.02 of its total potential returns per unit of risk. SMA Solar Technology is currently generating about 0.26 per unit of volatility. If you would invest 1,318 in SMA Solar Technology on October 17, 2024 and sell it today you would earn a total of 246.00 from holding SMA Solar Technology or generate 18.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Travel Leisure Co vs. SMA Solar Technology
Performance |
| Timeline |
| Travel Leisure |
| SMA Solar Technology |
Travel Leisure and SMA Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Travel Leisure and SMA Solar
The main advantage of trading using opposite Travel Leisure and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travel Leisure position performs unexpectedly, SMA Solar can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SMA Solar will offset losses from the drop in SMA Solar's long position.| Travel Leisure vs. Seche Environnement SA | Travel Leisure vs. Cornish Metals | Travel Leisure vs. Iron Mountain | Travel Leisure vs. Symphony Environmental Technologies |
| SMA Solar vs. Inspiration Healthcare Group | SMA Solar vs. Wheaton Precious Metals | SMA Solar vs. HCA Healthcare | SMA Solar vs. Travel Leisure Co |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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